Investment incentives

South African investment incentives

The South African government, particularly the Department of Trade and Industry, has a range of incentives available to investors, existing companies, entrepreneurs and co-operatives across many sectors.

South Africa wishes to diversify its economy and incentives are an important part of the strategy to attract investors to the country. The Department of Trade and Industry (the dti) is the lead agency in the incentives programme, which aims to encourage local and foreign investment into targeted economic sectors, but the Industrial Development Corporation (IDC) is the most influential funder of projects across South Africa.

There a variety of incentives available and these incentives can broadly be categorised according to the stage of project development: Conceptualisation of the project – including feasibility studies and research and development (grants for R&D and feasibility studies, THRIP, Stp, etc) Capital expenditure – involving the creation or expansion of the productive capacity of businesses (MCEP, EIP, CIP, FIG, etc) Competitiveness enhancement – involving the introduction of efficiencies and whetting the competitive edge of established companies and commercial or industrial sectors (BBSDP, EMIA, CTCIP, etc)

Some of the incentives are sector-specific, for example the Aquaculture Development and Enhancement Programme (ADEP), Clothing and Textile Competitiveness Improvement Programme (CTCIP) and the Tourism Support Programme (TSP).

Manufacturing

Key components of the incentive programme are the Manufacturing Incentive Programme (MIP) and the Manufacturing Competitiveness Enhancement Programme (MCEP). The initial MCEP, launched in 2012, was so successful that it was oversubscribed with almost 890 businesses receiving funding. A second phase of the programme was scheduled for launch in 2016. The grants are not handouts as the funding covers a maximum of 50% of the cost of the investment, with the remainder to be sourced elsewhere.

The Enterprise Investment Programme (EIP) makes targeted grants to stimulate and promote investment, BEE and employment creation in the manufacturing and tourism sectors. Aimed at smaller companies, the maximum grant is R30-million. Specific tax deductions are permissible for larger companies investing in the manufacturing sector under Section 12i of the Income Tax Act.

Other incentives

Other incentives available to investors and existing businesses in more than one sector include the: • Technology and Human Resources for Industry

Programme (THRIP) • Support Programme for Industrial Innovation (SPII) • Black Business Supplier Development Programme (BBSDP), which is a cost-sharing grant offered to black-owned small enterprises • Critical Infrastructure Programme (CIP) that covers between 10% and 30% of the total development costs of qualifying infrastructure Co-operative Incentive Scheme, which is a 90:10 matching cash grant for registered primary co-operatives Sector Specific Assistance Scheme, which is a reimbursable 80:20 cost-sharing grant that can be applied for by export councils, joint action groups and industry associations.

Incentives for SMMEs

A lot of emphasis is placed on the potential role of small, medium and micro enterprises in job creation and a number of incentives are designed to promote the growth of these businesses. These include: • Small Medium Enterprise Development

Programme (SMEDP) • Isivande Women’s Fund • Seda Technology Programme (Stp). • Seda is the Small Enterprise Development Agency, an agency of the Department of Small Business

Development that exists to promote SMMEs.

Trade-related incentives

The Export Marketing and Investment Assistance (EMIA) Scheme includes support for local businesses that wish to market their businesses internationally to potential importers and investors. The scheme offers financial assistance to South Africans travelling or exhibiting abroad as well as for inbound potential buyers of South African goods.

ONLINE RESOURCES

Department of Trade and Industry: www.thedti.gov.za Industrial Development Corporation: www.idc.co.za Mpumalanga Economic Growth Agency: www.mega.gov.za Official South African government incentive schemes: www.investmentincentives.co.za

Highveld Industrial Park

Superb infrastructure on a well-located site is attracting tenants.

The warehouses and workshops are The warehouses and workshops are suitable for diverse purposes, including suitable for diverse purposes, including and lime and lime beneficiation, warehousing, heavy and beneficiation, warehousing, heavy and

Following the closure of Evraz Highveld Steel and Vanadium Limited and the retrenchment light vehicle and machinery maintenance. Six office blocks offer furnished and unfurnished accommodation; also suitable for functions and light vehicle and machinery maintenance. Six office blocks offer furnished and unfurnished accommodation; also suitable for functions and Six office blocks offer furnished and unfurnished accommodation; also suitable for functions and of 1,700 employees in February 2016, Highveld Where is Highveld Industrial Park?Where is Highveld Industrial Park? required a creative approach to save it from being demolished and sold as scrap. Highveld Industrial Park, as it is now known, was developed from skom power stations 90km from Pretoria via the N4 120km from Johannesburg on the N12 skom power stations 90km from Pretoria via the N4 120km from Johannesburg on the N12 200km from Mbombela on the N4200km from Mbombela on the N4 the erstwhile steelworks and has been regenerated as Internal rail and road networkInternal rail and road network a multi-purpose site for industry and commerce and is today home to a diverse group of enterprises, including Value added services on siteValue added services on site transport, manufacturing and engineering companies. Highveld Industrial Park started with only four tenants in 2016 and has gone from strength to strength. In Electricity supplied directly from the Eskom Electricity supplied directly from the Eskom grid August 2019, it reached the 50-tenant mark, which was a rich natural gas directly supplied by Sasolrich natural gas directly supplied by Sasol proud moment for the Industrial Park, given the position site purificationsite purification it was in less than four years ago. Highveld Industrial clock maintenance services Specialised Environmental and Laboratory support services clock maintenance services Specialised Environmental and Laboratory support services Park’s tenants currently employ over 1,000 people acilitiesacilities and boasts a wide variety of companies from various rity and Access Control Medical and Fire rity and Access Control Medical and Fire industries, including a dragline bucket refurbishment company and rail siding operators which transport coal -fighting and ore from one of the largest private sidings owned by Highveld, to Richards Bay and Maputo. We welcome you to make an appointment and view facilities available for rental.We welcome you to make an appointment and view facilities available for rental.We welcome you to make an appointment and view facilities available for rental. NOVO Energy recently launched a R130-million gas For more information relating to Highveld Industrial Park:For more information relating to Highveld Industrial Park: compression facility at the Industrial Park, which is the http://www.highveldindustrialpark.co.za/http://www.highveldindustrialpark.co.za/ only one of its kind in Mpumalanga. Highveld Industrial Park is also extremely proud of its ongoing and https://www.facebook.com/highveldindustrialpark/https://www.facebook.com/highveldindustrialpark/ consistent support of SMMEs. By offering preferential rates to developing enterprises it has assisted in https://www.linkedin.com/companyhttps://www.linkedin.com/company-beta/18156518/ shaping successful companies, ranging from recycling to fence installations. https://www.youtube.com/channel/UCWXlGMO1n9UXYWDmnEGMsBAhttps://www.youtube.com/channel/UCWXlGMO1n9UXYWDmnEGMsBAhttps://www.youtube.com/channel/UCWXlGMO1n9UXYWDmnEGMsBA The park has a number of key assets that form the basis of its unique rental proposition that allows it to provide a holistic rental solution to its clients; these range from high-end administration offices and conference rooms to heavy industrial workshops that contain overhead cranes with capacities of up to 250 tons. Sasol Gas supplies piped methane-rich gas through its distribution network directly to the Park, Air Liquide and Afrox operate their gas plants in the Industrial Park, which makes the setting for an industrial park even more advantageous. The Park receives a direct supply of water from the local municipal dam and undertakes its own purification on-site. The Eskom grid supplies the Park directly with 350MVA power, which allows the Park to function independently of the local municipality, thus not burdening its infrastructure but still supporting industry within the municipal boundaries.

Structural mill

Highveld Structural Mill is currently the jewel in the crown of Highveld Industrial Park. It is Africa’s only producer of heavy structural steel, as well as railway lines. The mill was officially relaunched in June 2017 after ArcelorMittal South Africa entered into a contract to supply blooms and slabs for the mill to roll into heavy structural steel. The contract was for a period of two years, with an option for ArcelorMittal to acquire the Structural Mill at the end of the period. On 31 July 2019, ArcelorMittal announced its intention to purchase the mill and a sale of business agreement was duly entered into, subject to certain conditions being met. This is a milestone, not only for Highveld Industrial Park, but for industry in South Africa, as it ensures that the country maintains its strategic steel manufacturing capability and supports jobs, while enabling export opportunities.

CONTACT DETAILS:

Contact person: Andrea de Souza Physical address: Old Pretoria Road, Emalahleni,1035, South Africa Tel: +27 71 452 9678 Email: andrea@hipark.co.za Website: www.highveldindustrialpark.co.za

Building a robust economy in Mpumalanga

Industrial Development Corporation Regional Manager Mashweu Matsiela explains how the IDC’s mandate helps to improve lives.

Mashweu Matsiela

BIOGRAPHY Mr Mashweu Matsiela has been the Regional Manager of the IDC’s Mpumalanga office since 2013. He is currently also the Acting Manager of the corporation’s Limpopo office. Having been awarded a British Council scholarship, Mr Matsiela pursued his tertiary education in Scotland where he obtained a BSc degree (Biological Sciences) from Stirling University. This was followed by an MBA qualification from the University of Pretoria, including a Graduate Diploma in Company Direction (GIMT). Mashweu also earned himself a distinction on the highly regarded Global Executive Development Programme (GIBS).

What are the key goals of the IDC in Mpumalanga?

In line with the IDC’s mandate, our goal is to provide financial and non-financial support to entrepreneurs, thereby creating jobs and empowering youth and women, as well as supporting black industrialists.

What is your core business?

On a daily basis, we screen and assess business plans for viability. Based on the economic merit thereof, the IDC can then decide on funding the project under consideration. The corporation provides funding in the form of loans, equity and guarantees, among others, to cater for the funding needs of start-ups, expansion of existing capacities as well as acquisitions. Our funding ranges from R1-million to R1-billion per project.

The IDC also provides both pre- and post-investment business support as may be required for its clients, thereby ensuring that any gaps identified for the success of the funded entities are adequately addressed, thereby safeguarding the corporation’s investments. For example, if corporate governance within the funded entity is considered unacceptable, the IDC will, through its business support programme, ensure that appropriate interventions are implemented to address the gap as identified.

Do you sometime hold equity for a long period?

It depends on the strategic nature of the investment. These investments assist the IDC in fulfilling its developmental role where, for example, preference may be given to BEE parties at the time of disposal of shares in this regard, thereby enabling the corporation to achieve its empowerment and transformation agenda. Furthermore, dividends from these investments, along with interest income, contribute significantly towards the IDC’s internally generated funds.

Do you fund projects when times are tough?

Depending on the economic merit of the entity concerned, the IDC would provide funding because it is in our interest that these businesses remain viable and sustainable in the long run where they will

continue to contribute meaningfully towards the success of the economy of South Africa through sustained employment opportunities, for example. In actual fact the IDC’s developmental role is more pronounced during tough economic conditions as the corporation is expected to play a countercyclical role in turning the economy around.

What prompted the IDC to open a second office in the province?

That decision was informed by the prevalence of economic activities in the “highveld” part of the province, mainly in Emalahleni and the surrounding areas. Through this new office, which is located in Emalahleni, the IDC would like to reach out to the rest of the province and thereby exploit the business opportunities further afield in areas such as Mkhondo, Secunda, Ermelo, Delmas and Kwa-Mhlanga.

Which sectors are you supporting the most?

The IDC provides funding across the various sectors that fall under the corporation’s funding mandate, eg tourism, mining, manufacturing and agriculture, all of which are some of the key economic sectors within Mpumalanga. Please refer to the IDC website to see the sectors that the corporation supports.

Where is the most growth coming from?

Mainly from mining and manufacturing. Agriculture and tourism also present significant growth and transformation opportunities for the IDC as evidenced by the projects currently in our pipeline. We have seen a number of big projects coming forward from these sectors which are expected to create a significant number of jobs, once implemented.

Can you share with us some success stories?

Some of the IDC’s success stories within Mpumalanga include F&K Hlakani Engineering which specialises in steel fabrication and engineering services. Through the IDC’s funding the company grew from humble beginnings to become a key player that is highly regarded in the market.

Another example of the IDC’s success in the province is Overlooked Colliery, a mining company which has also become a key player in the mining sector. The financial support assisted the BEE shareholder of Overlooked to buy the rest of the shares in the company as well as to acquire another mine nearby.

Are there special provisions for women and young people in IDC programmes?

Indeed, the IDC is committed towards youth and women empowerment. The corporation has set itself specific targets in this regard where performance on these targets is measured accordingly at the end of each financial year. Through its Gro-E Youth Fund Scheme, the IDC provides funding to youth-owned businesses at preferential interest rates.

For further details contact IDC Mpumalanga

Tel: +27 13 752 7724 Fax: +27 13 752 8139 Email: mashweum@idc.co.za Web: www.idc.co. za